Buying a home can be expensive, but a little preparation and savvy thinking can help you save big time! To help you along, we've put together a list of our best tricks on how to save money buying your home.
1. Utilize Grants & Government Rebates
From time to time, home buyers can find grants and rebates that help ease the burden of buying a home. First time buyer programs are particularly common, but initiatives for experienced buyers occasionally become available too. Ask your real estate agent about federal and state grants that may be available to you.
2. Check Your Emotions At The Door
Your emotions can be your biggest expense when buying a home. If buyers get emotional, their financial generosity and flexibility tends to increase.
Remember that buying real estate is ultimately a business transaction. Keeping emotions out of your choices will make it easier to stay within budget, negotiate a fair price, ask for necessary repairs or contingencies, and—worst case scenario—walk away from a deal that isn't smart.
Always work with your real estate agent to ensure your decisions are being ruled by logic and not emotion. An excellent agent will help you stay grounded.
3. Shop Around For Mortgage Rates
Use a mortgage broker or talk to several different lenders before you settle on a rate. Your lender will make it extremely easy to sign on the dotted line before you comparison shop, but the difference in even 1% is a big chunk of money.
Let's look at the total amount you pay on a $250,000 loan with an amortization period of 30 years:
3% Rate: $491,943.63
4% Rate: $543,173.77
5% Rate: $595,629.46
6% Rate: $652,095.97
You've probably noticed that each percent adds more than $50,000 to your total bill. What else could you do with $50,000?
4. Improve Your Credit Score
Your credit score has a direct correlation to the mortgage rates you are offered. The better your credit history, the more a bank will want your business! The best rates go to the best credit scores.
5. Eliminate Other Debts
A lot of eager people will ignore financial best practices when buying a home. As a general rule, your debts with the highest interest rates are the ones you should be working off first, so pay off that credit card with 19% interest before buying your home. Furthermore, if your mortgage payments mean you can't effectively work off the principal on your other debts, then you're just getting further in the hole and buying sooner than you should.
6. Budget First, Then Buy
Come up with a budget in advance to find out how much you will really need. The reality is that a new house comes with new expenses, like mortgage payments, home insurance and property taxes. If you're unrealistic about what you currently spend, it's easy to over-extend yourself in the buying process and end up with costly debt.
When putting together your budget, include absolutely everything you spend money on. It's easy to overlook things that you may only purchase once in a while, such as rounds of golf, car maintenance, movie nights, prescription medicines, clothes and vacations. A few sacrifices can be realistic, but a new home won't be worth giving up all your hobbies and having rice for every meal.
If your new budget won't accommodate your existing standard of living, consider looking at homes with a lower price point.
7. Avoid Costly Shortcuts
Finally, one of the best ways to save money is to invest a little. Many rookie buyers will be tempted to cut corners and keep costs lower by skipping the home inspection or forgoing a lawyer. But these precautionary services help ensure you and your investment are protected from much larger expenses; they can catch details that could cost you everything. Don't risk a shortcut!
Saving Money When Buying A Home
By keeping cool and knowing your options, you can save a considerable amount of money buying your home. Ensure you're ready and have all your finances in order, and buying a house should be a fun and enjoyable experience for everybody. Happy house hunting!